Hello I'am a new trader and I was wondering what do I do when I'm not actively trading in the market a lot of people say study the market and such but what does that actually mean. I'm aware of backtesting is something like that if major importance and if so can anyone explain in detail how they do it themselves. Just in case I'm doing it wrong. Thanks for your help

It would help us if you could explain in detail how you approach backtesting currently.

Jiren:

Thank you for that, but what do you mean by study

Similarly, in regards to study, it would help to understand what you already know. For some, studying might mean completing all the lessons of the BabyPips school. For others, it might mean reviewing how past data releases impacted the market in preparation for the next events on the economic calendar.

I look back at the market and look at potential setups and where the ideal entry is and why price moved in that way

While that's an important exercise, it's not what most people mean when they refer to backtesting. The term backtesting is used for when you have a clearly defined set of trading rules and apply them to historical data. Since you are testing your strategy's performance against market movements that have already occurred, this practice is called backtesting.

The advantage of backtesting is that it can let you place practice trades against years and even decades of historical data. The disadvantage is that, as @TradeViper pointed out, market conditions are constantly changing.

Will an approach that worked in the past continue to work in the future? That is why it is a good idea to do both backtesting and forward testing. Forward testing is when you apply your trading rules to the current market to assess how your strategy performs now. This can be done either with a demo account or a small live account.